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Why Sundial Growers Stock Surged Today

By Joe Tenebruso - Apr 19, 2021 at 9:20PM

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Cannabis stocks could soon benefit from banking reform.

What happened

Shares of Sundial Growers (SNDL 2.02%) jumped 11% Monday as potentially game-changing marijuana legislation took an important step forward. 

So what

The U.S. House of Representatives voted in favor of passing the Secure and Fair Enforcement (SAFE) Banking Act. The bill seeks to allow banks and other financial service providers to legally serve cannabis companies. Many banks have declined to work with even state-licensed marijuana producers for fear of running afoul of federal law.

Dollar bills are cut into the shape of a cannabis leaf.

Sundial Growers and other marijuana stocks rallied Monday. Image source: Getty Images.

The bill is expected to head to the Senate, though a date has not yet been set for a vote. Still, Senate approval seems likely as all Democrats and more than half of the Republicans in the House voted to support the bill.

Now what

Many state-licensed cannabis businesses have found it difficult to obtain even basic financial services, such as checking accounts and payroll services. They've also been forced to seek more expensive forms of financing as bank loans have largely been unavailable to the industry. 

Should Congress pass the SAFE Banking Act and President Joe Biden sign it into law, it would likely make it significantly easier and cheaper for marijuana companies to obtain the capital they need to fund their growth initiatives. The act should also make cannabis businesses safer and more efficient, as credit services would lessen the need for cash in day-to-day operations.

Astute investors know this and bid up Sundial's shares and other cannabis stocks in hopes that the SAFE Banking Act will soon make its way through Congress.

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